As the corporate PMI market begins to show signs of recovery after the stagnation of the early 1990’s, large group business could become increasingly attractive to smaller brokers.
The big brokers such as Sedgwick and Aon do not have exclusive rights to large group business. But the key point for the smaller intermediary to consider when entering the throng is whether it is financially viable.
Broker Andrew Green of Green Denman cites research conducted into the top 100 companies on the stock exchange. The results showed that less than 40% had private medical schemes. In his view the big brokers do not have the market sewn up and he believes the opportunities for the smaller intermediaries are clearly evident.
Advising on PMI generally is a specialised skill, but this is not necessarily monopolised by the big players. Even so, in-depth knowledge is essential in order to compete with the purchasing power of larger brokers. A small firm may not be able to withstand the fierce competition that drives down prices.
Philip Fowles, sales and marketing director for BCWA makes the point that margins can be squeezed to the limit due to phenomenal administration costs. “The amount of admin is colossal. A recent trend in the broker market is the taking of less commission on large groups to secure the business,” he says.
But the loyalty derived from a long-standing relationship between broker and client is an invaluable asset. Business is therefore less likely to be moved around. Of course, the personal touch is not purely the domain of the smaller firm. But there is a perceived notion that the local intermediary may be able to establish a closer and more intimate link with a client.
Intermediaries should note the words of James Estall, general manager of Guardian Health. At Laing & Buisson’s annual PMI conference in October 1996, he estimated the share of the company paid PMI market sold through intermediaries to be 72%.
The key is not be disheartened that the lion’s share of this business is in the hands of the big boys. Not only is it feasible to gain corporate business, it is possible to extend the broker’s role.
Advice given need not necessarily be restricted to the products on the market. A broader perspective on health care management as a whole could seriously enhance the broker’s position. For example, offering tips on health screening could prove advantageous in securing high profile business.
To classify the market, it has traditionally been the case that companies where numbers exceed 100 are placed in the large category. The boom of the 1980’s saw company-paid health insurance take the lead as the fastest growing segment in the PMI market, outflanking individual cover. But all this changed as recession set in and many companies went to the wall.
The first benefit to be thrown overboard in times of economic gloom was often the private medical scheme. Combined with the substantial increases in the real price of PMI in the early 90’s, the market remained static for the early part of this decade. Current trends in the economic climate indicate that this is set to change.
Laing & Buisson’s 1997 Review of Private Healthcare says that growth is likely to take place in the company-paid segment as the employment market recovers further.
Company medical insurance is becoming regarded again as a standard perk and as an accepted part of the employee benefits package. But is the provision of private healthcare simply the altruistic face of big business?
Basically, company paid PMI can be broken down into four sub-sections:
• Employer pays whole subscription
• Employee pays whole subscription
• Employee pays part of subscription
• Employer pays for employee, employee pays for dependants
It could be argued that it raises morale and encourages commitment. But the essence of corporate PMI is epitomised by Nye Jones of Guardian Health. He distills it into three key elements: recruit, retain, reward.
PMI is an attractive benefit, and is close on the heels of pensions in terms of importance in the corporate package. It is fair to say that employees who have never experienced the value of PMI do not know what they are missing. But those who have had this luxury are those who see it as an integral part of their benefits. And they would probably think twice before accepting a job where the remit did not include PMI.
Group voluntary schemes can be an alternative where the employer does not want a large cash outlay, but is prepared to negotiate on behalf of the employee.
As Robert Berry, IFA and corporate marketing manager of Norwich Union Healthcare, asserts: “On the positive side, offering a corporate PMI policy should improve company loyalty and retention.” He also believes that PMI is partly a defensive mechanism, offered because other companies have it as a matter of course. But this is not always the case.
For companies there are clear advantages in buying PMI for their staff.
PMI’s biggest selling point means organisation of time off to suit the employer and employee and minimisation of sickness absence.
Added to this, the reported cases of `modern diseases’ are increasing in prevalence. Repetitive strain injury and work-related stress are common ailments in the office environment – not to mention sick building syndrome. The focus on health in the workplace is not to be sniffed at.
Jason Drew, general manager of corporate consultancy and voluntary distribution for BUPA, views the private health insurer’s role as a form of risk management. “We need to bring employees into the fold of corporate healthcare and find ways of covering the workforce” he says.
Risk management is central to PMI. A proactive management of health care insurance leads to directing costs more effectively and identifying distinct needs.
Nye Jones gives an example: “If manufacturing companies have employees with skeletal problems then we need to recommend back specialists. And psychiatrists could be brought in to deal with stress.
It does not matter who actively case manages so long as the employee is in good health.”
The future of PMI also relies heavily on the future of the NHS. As the public’s perception of a reliable health service dwindles, so the reliance on private health provision grows.
As NHS waiting times between GP referral and specialist consultation appear to grow ever longer, more people are becoming disillusioned with state healthcare. The Labour government’s emphasis on the issue of emergency admissions rather than waiting times for elective surgery has compounded dissatisfaction with the NHS.
The issue must be whether or not the new Labour Government can succeed in making the NHS so good as to undermine demand for PMI, and whether or not they want to undertake this task.
Sedgwick’s healthcare practice director John Humphrey, calls for a constructive debate between government and the private health sector.
“We are all heading in the same direction, our mutual aim is keeping employees healthy and alive. We are not in the business of just placing PMI, the health insurance part is sometimes the last resort,” he says.
The company’s philosophy is very much based on consultation and strategies. This involves taking a close look at why corporations want PMI in the first place, and then making it part of an all encompassing employee benefits programme.
Nye Jones sees massive growth in the industries as being dependent on legislative changes: “The only way to grow significantly is for industry to work with government as the catalyst.”
The next few years will prove crucial in the world of large corporate PMI. Broker Andrew Green highlights this point by quoting results from a recent NOP survey of 2,000 people on how they viewed the NHS. “Three in four people believed that in 10 years time everyone would need PMI,” he states.
So it could be argued corporate schemes will eventually become a matter of course. What is currently seen as a luxurious added extra could one day be an integral and much needed part of the company benefits package. It should also provide rich pickings for intermediaries of all sizes who are prepared to offer their clients a specialist service.